Coulson, the editor former editor of News of the World, was one of seven defendants facing charges for intercepting voicemails on the phone of murdered teenager Milly Dowler. They were also accused of hacking into the royal family's phone lines. Coulson was appointed by Cameron as his director of communications in 2007.
"I have an old-fashioned view about 'innocent until proven guilty'. But if it turns out that I have been lied to, that would be a moment for a profound apology and, in that event, I tell you that will not fall short," said Cameron to Parliment in 2011.
Cameron fulfilled his promise when he spoke to reporters on Tuesday.
"I take full responsibility for employing Andy Coulson. I did so on the basis of undertakings I was given by him about phone hacking and those turn out not be the case. I always said if they turned out to be wrong, I would make a full and frank apology and I do that today. I am extremely sorry that I employed him. It was the wrong decision and I'm very clear about that," he said.
Cameron stressed he was giving Coulson a "second chance" when he hired him and took him along to Downing Street in 2010.
Osborne responded to his accusations, saying, "The person who worked aside Damian McBride is no person to give lectures."